OECD downplays globalisation effects

In its latest assessment of world labour trends, the Organisation for Economic Cooperation and Development (OECD) on Tuesday said economic momentum would likely be hampered by high oil prices.

The body also challenged the argument that globalisation – the freer flow of trade and investment across national borders – has contributed to widespread job losses in high-wage countries.

But the OECD acknowledged that globalisation had contributed to losses in some sectors and urged governments to adopt policies cushioning the shock of unemployment in order to prevent a backlash against open trade.

With overall growth dragged down by rising oil rates and exchange rate volatility, notably in the eurozone, “the OECD employment picture is expected to improve only slowly in 2005-2006,” the report said, adding that wage increases would be moderate.

In the 30 OECD member countries, employment growth is projected to come to only 1.1% in 2004 and 2005 before edging up to 1.3% in 2006.

Unemployment rates are expected to decline “only slowly” in 2005-2006, coming to 6.4% of the work force next year after 6.7% in 2004 and 2005.

Jobless rates

Projected jobless rates also mirror the lopsided pace of global growth that the OEDC has highlighted in earlier studies.

The unemployment rate is seen as declining from 5.1% this year to 4.8% in 2006 in the United States and from 4.4 to 4.1% in Japan.

But in 15 members of the European Union, excluding the 10 states that joined the bloc in May last year, jobless rates will stay stubbornly high – 8.2% this year and 8% in 2006.

“A quick review of recent history casts considerable doubt on fears that trade with low-wage countries has been a barrier to achieving high employment and rising living standards in OECD countries” OECD report

Wages per employee in the OECD are meanwhile seen rising 3.2% this year and 3.3% in 2006.

While wages in the United States will increase 4.3% and 4.5%, they will be stagnant in the 15-member EU, rising 3.1% in each year, according to the OECD.

The OECD in its 276-page report devoted considerable space to an assessment of globalisation on the world labour market and in particular to delocalisation, the transfer of jobs from high-wage to low-wage countries.

The report noted that “average wage costs (are) dramatically lower in India, China and Brazil … than in most OECD countries”.

No competition

Although it may seem that workers in high-wage countries could not compete with those in fast-developing emerging market countries, the OECD said, “aggregate employment performance does not appear to have suffered in the OECD countries that are most open to trade or where trade openness has increased most rapidly”.

It cited research in 15 countries in 2000 showing that although employment had fallen more rapidly in industries heavily exposed to international competition, those industries accounted for less than 4% of total employment.

“A quick review of recent history casts considerable doubt on fears that trade with low-wage countries has been a barrier to achieving high employment and rising living standards in OECD countries,” the study concluded.

But it also recognised that globalisation was not painless, notably as workers displaced by trade tended to be older, less educated and have skills associated with declining industrial sectors.

As a result, it said, governments should implement a mix of programmes providing income support in the event of job loss, as well as counselling, training and other re-employment assistance.